PPI sales banned at point of sale

The Competition Commission has today announced

• a ban on the sale of PPI during the sale of the credit product and for seven days afterwards
• a prohibition on single-premium policies, personal PPI quotes, annual statements
• measures to make sure that improved information is available to consumers to make it easier for them to compare and search for products and switch policies at a later point.

The commission’s final report into the Payment Protection Insurance (PPI) market concluded that businesses that offer PPI alongside credit face little or no competition.

The vast majority of the UK’s more than 12 million PPI policies are sold at the same time as a consumer takes out a loan, credit card or other type of credit. The CC found that many consumers are unaware that they can buy PPI from other providers, rarely shop around to compare prices and terms and conditions of PPI policies, and rarely switch PPI providers.

Peter Davis, inquiry chairman and CC deputy chairman, said: “These are significant measures carefully designed to address the serious competition problems that currently exist in this market. The ‘point-of-sale’ advantage has meant that leading providers have faced little competition for PPI and, as a result, have charged persistently high prices.

“Consumers’ interests are not best served when the only choice the vast majority have is whether or not to purchase their credit provider’s PPI product. The resulting lack of competition means that the only offer consumers get is simply worse value than they are entitled to expect. Allowing the current short-comings to continue unchecked would be damaging not just to consumers but also ultimately to the PPI industry itself.

He said: “We recognise that prohibiting firms from completing PPI sales during this time interval and prohibiting single-premium policies are significant interventions in this market. However, these actions are necessary to enable consumers to benefit from lower prices and better choice.

The commission expects that the measures will come into force during 2010, with the information remedies in place by April 2010 and other measures by October 2010.

• New data from the ABI shows that unemployment claims on Payment Protection Insurance (PPI) rose to 19,105 in November 2008, up from 8,772 in November 2007 – an increase of 118%.
• Nick Starling, the ABI’s Director of General Insurance and Health, said: “Many people are already feeling the effects of the recession, through rising unemployment. Losing your job is stressful enough, and even more so when you don’t have any protection in place to help ease the financial burden. These figures are alarming, showing just how valuable PPI, and other types of protection insurance, are during difficult economic times.“
• Between September to November 2008, PPI unemployment claims rose by 38%, from 13,854 to 19,105.